n. 532 April 2014

ISSN: 0870-8541

Understanding Incubator ValueA Network Approach to University Incubators

Catarina Roseira1

Carla Ramos2

Francisco Maia1

Stephan Henneberg3

1 FEP-UP, School of Economics and Management, University of Porto2 INSPER, Instituto de Ensino e Pesquisa, São Paulo, Brasil

3 Queen Mary University of London

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Understanding Incubator Value – A Network Approach to University

Incubators

Catarina Roseira*

Faculty of Economics of Porto, University of Porto, Portugal

Rua Dr. Roberto Frias, 4200-464 Porto, Portugal

Email: croseira@fep.up.pt

Carla Ramos

Insper- Instituto de Ensino e Pesquisa, São Paulo, Brasil

Francisco Maia

Faculty of Economics of Porto, University of Porto, Portugal

Stephan Henneberg

Queen Mary University of London

*corresponding author

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UNDERSTANDING INCUBATOR VALUE –

A BUSINESS NETWORK APPROACH TO UNIVERSITY INCUBATORS

Abstract

Networking represents a cornerstone for entrepreneurial action, nurturing relationships that provide access to

necessary resources. Previous research shows that such relationships can be fostered as part of incubation

processes. However, there is a lack of understanding of the underlying networking process, particularly in

settings aimed at promoting them such as Networked Incubators (NIs). Moreover, little is known about

entrepreneurs’ expectations when joining a NI, or about entrepreneurs’ satisfaction regarding the fulfilment of

those expectations. We address these issues by investigating the features of networking within NIs, and by

positing new ways of measuring incubator performance: performance from the entrepreneurs’ perspective. The

article focuses on the start-ups located in UPTEC - Science and Technology Park of the University of Porto, a

NI. A combination of qualitative and quantitative methodological tools (including content and social network

analysis) is used. Findings show how entrepreneurs hold relatively high expectations for the dimensions of

Legitimacy/Credibility, Infrastructure, and Networking, and lower expectations regarding the Business Support

provided by the incubator. However, the UPTEC network shows low levels of Networking, raising questions

regarding effectiveness of NIs. The findings also reveal a number of factors that impact the value and

effectiveness of the networking process within a NI.

Keywords

University Incubators; Networked Incubators; Business Networks; Value; Entrepreneurship; Social

Network Analysis.

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1. Introduction

Since the 1990’s there has been a growing importance of business incubation (Honig and Karlsson 2010),

supported by public and private investment (Grimaldi and Grandi 2005). Incubators are considered adequate

tools to promote the creation of small innovative companies (Honig and Karlsson 2010), and to reduce the

probability of new business failures (Ahmad and Ingle 2011; Sofouli and Vonortas 2007). Link and Scott (2003)

argue that this increase in the number of incubators and science and technology parks went hand in hand with an

academic debate on whether such initiatives enhance the performance of new ventures, associated universities,

as well as regions (Schwartz and Hornych 2010). Our study specifically draws on the role of networks in the

incubation process, a stream of research on business incubation identified by Phan et al. (2005). As such, our

study stresses the networking dimension, i.e., the role of relationships between business actors that underpins the

incubation process. We focus therefore specifically on Networked Incubators (NI) (Hansen et al. 2000), in

which networking activities are considered especially critical and are therefore fostered.

It has been widely recognised in the literature that start-ups1 face unique challenges (Bolingtoft and

Ulhoi 2005). Their newness (Kale and Arditi 1998) and smallness (Allen and Rahman 1985; Bøllingtoft and

Ulhøi 2005; Durão et al. 2005) have been identified as the main obstacles for rapid and effective development.

Business incubators are believed to provide access to the support that is required to help the start-ups deal with

these challenges (Phan et al. 2005).

However, despite the recognized proliferation of business incubators, their effectiveness and value

contribution is disputed (see for example Abetti 2004; Autio and Klofsten 1998; Becker and Gassmann 2006;

Phan et al. 2005; Schwartz 2013). Additionally, the extant literature demonstrates the difficulty of evaluating the

actual value of incubation and networking activities for start-ups (Aerts et al. 2007), as well as the lack of

consensus on the specific and desired value dimensions relating to incubators (Ahmad and Ingle 2011; Hackett

and Dilts 2004; McAdam et al. 2006). This is particularly crucial when the entrepreneurs’ expectations

regarding the incubator value are considered, i.e., when a tenant-centered view is adopted. Aerts et al. (2007, p.

265) contend that “tenant research could definitely also result in interesting conclusions and intensify our

understanding of the incubator business”. In line with these issues, our first research aim is to evaluate the

value and performance of the networked incubator from the entrepreneurs’ perspective. To do so, we propose an

integrative value framework that can be used by policy makers and incubator managers as a tool to carry out a

systematic evaluation, i.e. to audit the extent to which an incubator provides value to its tenants and is effective

1 In this paper, the term start-up refers to a new business venture in an incubation context; the term entrepreneur

refers to the start-up’s promoter/owner.

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in its networking goals. Thus, we answer Bollingtoft and Ulloi’s (2005, p. 268) call for a “more detailed look at

[...] the specific sources of value [that a business incubator] provides to entrepreneurs and entrepreneurial

activities, the organizational settings under which it works, and the practices, resources, and/or services it

employs to facilitate or hinder new start-ups and subsequent growth”.

Additionally, a clear view of business incubators’ internal social and business dynamics is still required

(Ahmad and Ingle 2011). As our second research aim, we address this gap by exploring the processes of

networking within a networked incubator (i.e., between the incubator management team and the start-ups, and

between the start-ups themselves). In line with Hackett and Dilts’s (2004) call for a turn of attention in

incubation research, from ‘what’ factors, to ‘how’ and ‘why’ factors, our goal is to understand the underlying

processes, motivations, and outcomes of incubators’ internal networking. Ahmad and Ingle (2011) also argue

that there is an extensive body of knowledge regarding the structure and facilities on incubators, but not enough

about the underlying processes that are taking place; this reflects a change of focus from the incubator to the

actual incubation process (Hannon and Chaplin 2003), i.e., a transition from a static to a dynamic approach

(Ahmad and Ingle 2011; Soetanto and Jack 2013).

This article will progress as follows: Initially the main challenges that start-ups face are reviewed. The

next section discusses the concept of business incubators. Due to the specific focus of our study on networking

processes, the concept of Networked Incubators is introduced. This is followed by a discussion of the issue of

evaluating the performance and value creation of incubators. An integrative framework is developed which links

incubator support activities to specific value dimensions addressing start-up challenges. Following on, our case

study and research design is outlined, and finally, our main findings are discussed, together with an overview of

our main contributions, as well as study limitations and suggestions for future research.

2. Challenges of Start-up Firms

A start-up faces unique challenges and difficulties that can be a strong deterrent for launching or developing a

start-up (e.g. Bruneel et al. 2012), especially during their inception stage. These challenges can be categorized

into the liability of newness (Hughes et al. 2007; Kale and Arditi 1998) and the liability of smallness (Allen and

Rahman 1985; Bøllingtoft and Ulhøi 2005; Klofsten and Mikaelsson 1996).

The liability of smallness refers to the impact of size on available resources or skills; start-ups

frequently show lack of management knowledge and management skills (particularly in the case of technology-

oriented ventures; Allen and Rahman 1985; Smilor 1987), or more generally a lack of resources that are critical

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to their survival (Grimaldi and Grandi 2005; Schwartz and Hornych 2010). Bøllingtoft and Ulhøi (2005) add

that the absence of administrative support and high initial operational costs are typical barriers for the early

development of a new business. Such as yet under-developed internal resources make some entrepreneurs resort

to incubators (Klofsten and Mikaelsson 1996), which provide them with access to a pool of resources and

capabilities otherwise beyond their reach (Peters et al. 2004; Soetanto and Jack 2013). Thus, business incubators

can be seen as tools to create a positive and nurturing environment for small business to develop their ventures

and overcome their liability of smallness (Aerts et al. 2007; Allen and Rahman 1985; Bruneel et al. 2012).

The liability of newness (Kale and Arditi 1998; Schwartz and Hornych 2010) refers to the start-up’s

lack of visibility in the market, as well as to the lack of connections (business relationships) within a network of

resources (Pfeffer and Salancik 1978). At the inception stage, a start-up faces the challenge of proving itself to

numerous business actors while the start-up’s and/or the entrepreneur’s relevant social capital is often still weak.

Thus, the firm’s brand equity or reputation is often virtually non-existent (Grimaldi and Grandi 2005). This may

hinder the development of social and business relationships based on external interaction and exchange

processes, such as the establishment of stable relationships with customers, creditors, suppliers, and other

organizations. Consequently, accessing important resources such as funding, market channels, or developmental

partnerships, may prove difficult. Additionally, the liability of newness can also impact on endogenous

processes related to learning new roles, developing trust, and cooperation between organizations (Kale and

Arditi 1998). Business incubators are expected to be able to provide effective solutions to this problem by

providing credibility and legitimacy (Bergek and Norrman 2008; Bøllingtoft and Ulhøi 2005; Salvador 2011).

3. Incubators Settings

3.1. Business Incubators and Networked Incubators

Business incubators (BIs) provide “the social environment, technological and organizational resources, and

managerial expertise for the transformation of a [...] business idea into an efficient economic organization”

(Phan et al. 2005, pp. 107). BIs are “especially designed to hatch enterprises” (Aerts et al. 2007). The term

business incubator is normally used as an umbrella concept to describe a wide range of ubiquitous (Bergek and

Norrman 2008) and heterogeneous institutions (Scilitoe and Chakrabarti 2010) in different contexts, with

idiosyncratic objectives (Schwartz, 2013). For instance, incubators can be private or public, specialized in an

industry or diversified, profit or non-profit-based (Grimaldi and Grandi 2005), and physical or virtual (or a

combination of both) (Durão et al. 2005). Due to their diverse nature, a variety of organizational missions,

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structures, processes and resource flows can be expected (Becker and Gassmann 2006). Within this universe,

Networked Incubators (Hansen et al. 2000) emerge as a particular type of BIs which is of particular interest to

our study.

Networked Incubators (NIs) are a specifically set-up to provide access to an extensive and valuable

network of resources, knowledge, and legitimacy that can be used and leveraged by the start-up tenants in the

NI; these networks can be accessed both internally within the NI and also externally (Hansen et al. 2000;

Hughes et al. 2007; Soetanto and Jack 2013). In the latter case, NIs perform a “boundary-spanning function in

facilitating access to different types of resources and service providers through institutionalised networks”

(Brunnel et al. 2012, p. 117). In NIs, networking is institutionalized; thus, networking mechanisms promote

business relationship building even before the start-ups need these, thereby allowing entrepreneurs to take

advantage of those mechanisms rapidly. As a result of this routinization, networking is less dependent on

specific individuals or entrepreneurs’ personal connections, and it can be expanded to include numerous

companies or other actors (such as regulators, policy-makers, research institutions) in many different sectors

(Hansen et al. 2000).

Within BIs (NIs included), service and incubation processes may differ according to their base of

customers and available resources (Grimaldi and Grandi 2005), contextual factors (e.g. industry, national

innovation systems, life cycle and newness grade of innovation) or stakeholders with different and possibly

divergent expectations (Abetti 2004; Mcadam et al. 2006). Thus, one way to differentiate different incubator

types is to classify them by their incubation service activities, i.e. the kind of support they provide to start-ups.

3.2. Dimensions of Incubator Support

Smilor and Gill (1986) identified two major approaches to define incubator support activities. The first approach

focuses on providing office facilities to the start-ups at affordable prices. The second approach focuses on

actively supporting the creation and development of new businesses. An incubator may choose to adopt the

facility provision strategy, the business support strategy, or a combination of both (Hacket and Dilts 2004;

Mcadam and Marlow 2007; Smilor and Gill 1986). In this paper, in line with Bruneel et al. (2012) in their study

of the evolution of business incubators, we are grouping incubators’ support offerings into the following

categories: infrastructure, business support, and network support. Following Schwartz (2013), we are also

considering a fourth category, i.e. legitimization/credibility that relates to the reputational benefits that start-ups

may accrue from being affiliated with the BI’s brand (Grimaldi and Grandi 2005; Salvadorm 2011). The four

types of support are detailed below.

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3.2.1. Infrastructure Support

One approach focuses on providing facilities such as office space to the start-ups at affordable prices (Smilor

and Gill 1986). It can also include shared administrative and other support services (Bergek and Norrman 2008)

such as reception, clerical services, meeting rooms, conference rooms, car parking (McAdam and McAdam

2008) or energy, water, telecommunications and cleaning (Bruneel et al. 2012). The strategy is primarily a real

estate-related one, and success is defined in terms of space occupation rates and space rental yields (Smiler and

Gill 1986). This turnkey solution offers economies of scales that results in reduced overhead costs; it also takes

the need to manage these daily non-core activities away from the start-ups, allowing them to concentrate on the

development of their business (Bruneel et al. 2012).

3.2.2. Business Support: Management and Technical Support

Business support can entail the provision of resources and activities that are likely to help developing start-ups’

businesses. This may include access to technological facilities (e.g. laboratories), information technologies, or

sources of funding, services such as business counseling, public relations, recruitment, accounting and legal

counseling, or pooled purchasing (Bøllingtoft and Ulhøi 2005; Hansen et al. 2000; Soetanto and Jack 2013).

Such services can aim at reducing the start-up’s costs, e.g. shared IT purchasing leading to a lower price. Other

services can focus on helping develop the start-up business: like managerial support counseling or

entrepreneurial training and coaching (Bergek and Norrman 2008; Bruneel et al. 2012).

Overall, the business support offered by the business incubator management team to the start-ups can

be categorized to fall into two basic types (Scillitoe and Chakrabarti 2010): management support, and technical

support. Management support relates to generic dimensions such as business planning, fiscal support, staff

recruitment, and access to capital or business contacts (as O’Gorman et al. 2008 exemplify). Technical support

consists of providing access to specialized technical knowledge or infrastructure, or to scientific knowledge

created by, for example, universities. Relating to business support, incubators’ success is defined according to

the success and expansion of the new businesses, namely their sustainability after the incubation period (Ahmad

and Ingle 2011).

3.2.3. Networking Support

Bollingtoft and Ulhoi (2005) emphasize that incubators should focus on developing a network of businesses that

can help start-ups survive in the long run. For example, the incubator may work as an intermediary between the

start-ups and a network of external potential partners, such as customers and suppliers, providers of specialized

services, financial and funding institutions or research facilities (Schwartz and Hornych 2010; Sofouli and

Vonortas 2007).

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Networking support by the incubator therefore reflects its focus and capacity to promote and nurture

relationships amongst tenants (Hasen et al. 2000), as well as between tenants and external entities (Bruneel et al.

2012). In an incubator context, networks based around business relationships are thus expected to create value to

the start-ups in several different ways, namely by providing access to new ideas and resources that support

business processes, enhancing credibility and reputation through alliances with reputable partners, or by

facilitating knowledge exchange and the generation of collective learning (Lorenzoni and Lipparini 1999;

McAdam and McAdam 2008); these networks can also achieve economies of scope, resulting from a joint

utilization of resources (Panzar and Willig 1981). Networking in incubation settings has thus been described in

the literature as a decisive factor of success for the incubation process, especially in the context of NIs (Hansen

et al. 2000; Hughes et al. 2007; Rothschild and Darr 2005; Scilitoe and Chakrabarti 2010).

3.2.4. Legitimacy/Credibility Support

Besides the infrastructure, management, and network support functions, a start-up can further benefit from

joining an incubator. The relationship between a start-up and an incubator can work as a type of certification,

thereby helping start-ups to overcome or minimize the usual initial lack of credibility vis-à-vis customers,

suppliers, partners, or sponsors (Akerlof 1970). It has to be noted that the affiliation of the incubator with

respectable external partners (such as leading universities) works as an additional certification to the start-ups’

quality (Grimaldi and Grandi 2005). Additionally, the business incubator’s brand may work as a reputational

signifier for the start-ups (Salvador 2011): the association with the incubator brand may enhance the start-up’s

legitimacy as an actor in a market (Smilor 1987). Incubators may also assume a mediation role between the

external partners (either business or institutional) and the start-ups, thereby contributing the enhancement of the

latter’s visibility, credibility, and legitimacy (Bergek and Norrman 2008). In our paper, legitimacy/credibility is

mostly related to possible reputational benefits that start-ups may accrue from being affiliated with an incubator.

While these four types of support may co-exist in the same incubator, there has been a shift in the focus

of BIs, from real estate providers, to developmental and support incubators (Aerts et al. 2007). Over the last

years, incubators have been putting increasing emphasis on intangible and high-value services, such as the

“access to external resources, knowledge and legitimacy” (Bruneel et al. 2012, p. 113). This led to the

development of new incubating models (Grimaldi and Grandi 2005), such as the NIs (Hansen et al. 2000). Still,

defining the incubators’ value to start-ups is an important step to understanding their impact on the incubated

firms (Bruneel et al. 2012).

4. Assessing the Value of Business Incubators

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As more public and private resources are invested in business incubators, it is imperative to assess “what return

society gets on these investments” (Bergek and Norrman 2008, p. 21). Measuring the impact of the incubation

process as a way to assess the quality and value of the BI investments is, however, a difficult task (Hackett and

Dilts 2004). It requires, for example, collecting and analyzing a massive range of data to determine if the

survival rate of new initiatives would be different if companies had not been incubated (Schwartz 2013). Also,

as McAdam et al. (2006) point out, there is no consensual definition on what constitutes a successful incubator.

Several authors (Ferguson and Olofsson 2004; Lofsten and Lindelof 2002) have identified performance

measures, such as tenant success, graduation and survival rate, jobs created, sales growth and profitability. For

university technology incubators, Mian (1996, 1997) adds indicators such as program growth and sustainability,

contributions to sponsoring the university’s mission, and community-related impact.

One of the difficulties in evaluating a incubator performance stems from the fact that value can be

created and measured at different levels, for example, at the overall incubator level as well as the start-up level

(Clausen and Kornliussen 2012; Scillitoe and Chakrabarti 2010). At the incubator level, performance is related

to the extent to which its management model is able to respond to the expectations held by both the incubator’s

promoters and funders, and the entrepreneurs (e.g. Mian 1997). At the start-up level, incubator performance can

be evaluated in terms of its contribution to the start-up development through the provision of adequate support

functions, that is, how much value it delivers to the start-up. Existing studies show that shared services (Mian

1996, 1997), and the infrastructure element (Bergek and Norrman 2008; Voisey et al. 2006) are amongst

entrepreneurs’ most valued factors. Thus, an entrepreneur’s decision to locate a start-up in a specific business

incubator is linked to his/her expectations regarding the start-up-related value this incubator will deliver; these

expectations may or not be fulfilled, according to the level of ‘customer’ or tenant experiences (see for example

Ahmad and Ingle 2011).

Although there has been a shift of focus in the study of incubator performance from an incubator

perspective to a start-up-related value view (Aaboen 2009; Ahmad and Ingle 2011; Bruneel et al. 2012; Clausen

and Kornliussen 2012; Hughes et al. 2007), the value of incubators as perceived by the entrepreneur is not yet

fully understood. Thus, in this study, we will focus on start-up-related value of business incubators. We use the

concept of perceived value as the juxtaposition between the entrepreneur’s expectations of the incubators’

ability to provide the support he/she considers relevant, and his/her level of satisfaction with the incubation

support, in line with Grimadi and Grandi (2005) and Clausen and Kornliussen (2012). We thus follow Ahmad

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and Ingle (2011, p. 641) in that “the ultimate judges of the value of business incubation are the client firms and

the entrepreneurs who run them – the incubator customers”.

5. Research Framework and Design

5.1. Networked Incubator Value-adding Framework and Research Questions

The main theoretical support concepts discussed above inform our synthesis of a conceptual framework of the

value-adding aspects of a NI from the incubated entrepreneur’s perspective (see figure 1). The value potential

provided by the NI relates to the support dimensions that start-ups need and look for in an incubator to

overcome their initial challenges, namely the liabilities of smallness and of newness. The support provided by

the incubator can be analyzed along four dimensions, as introduced above: infrastructure, business support,

legitimacy/credibility, and networking.

Figure 1 Potential of Value-adding Support by the Business Incubator

In line with the concept of perceived value, an entrepreneur chooses and assesses a specific incubator

based on expectations regarding the incubator’s potential to provide value along the four support dimensions.

However, the existing literature offers limited clarity regarding these expectations. Thus, in line with our state

research aims, the first specific research question is: (Q1) “What are the expectations which entrepreneurs have

when choosing a business incubator?” Based on our framework, we capture the four support dimensions

outlined in Figure 1: Business Support, Infrastructure, Credibility/Legitimacy and Networking. Moreover, we

are also interested in the specific perceptions held by entrepreneurs on the value they actually receive from the

incubator. Thus, the second research question is: (Q2) “What is the entrepreneurs’ degree of satisfaction in

relation to their initial value expectations of the business incubator?”. Again the four support dimensions

provide a dimensional framework for this issue.

Support Dimensions

Business Support

Infrastructure

Legitimacy/Credibility

Networking

. Lack of contacts

. Lack of management skills

. Lack of resources

. Lack of scale

Liability of Newness

Liability of Smallness

Initial Challenges

Minimization

of liabilities

Perceived-value of

support

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Additionally, given that networking is considered a crucial aspect in business incubation, especially for

a NI as in our case study, we analyze the particular issue of the network dimension specifically by identifying

what types of relationships are established within the incubator. Thus, our third research question is: (Q3) “What

is the nature of networking (network relationships) as part of the business incubator?”. This is in line with

Bøollingtoft and Ulhøi (2005, p. 275), who claim that we do not know “much about the nature of Networking -

do formal or informal networks dominate? Or both? And in what areas”. Finally, we aim at understanding how

factors such as participation in networking activities, physical proximity, complementarity between the start-

ups, inhibit or enhance networking (Aaerts et al. 2007; Schwartz and Hornych 2008), and therefore formulate

our last research question, (Q4) “How does networking evolve in a business incubator?”

5.2. Methodology and Research Design

A multi-company case study method was adopted (Yin 2009), combining qualitative and quantitative

techniques. Our case study relates to a specific university incubator: UPTEC - the Science and Technology Park

of the University of Porto, and all its tenant ventures. According to exploratory interviews within UPTEC and to

secondary data (for example, UPTEC internet sites and internal documents), UPTEC fits the concept of a

networked incubator. UPTEC’s mission is to “ foster the creation of technology based companies and attract

research and innovation centers of large national and international companies (...) through a clustering

strategy and by sharing resources and services” (www.uptec.up.pt). UPTEC has a network of external partners

to assist in the development of start-up projects; it organizes regular formal and informal networking events

targeted at the start-ups and/or external actors, and puts a continuous effort on matching potential partners

within the community of the start-ups as well as with outside partners. When data was collected between March

and June 2011, UPTEC housed around 100 tenant firms, of which ten are considered by the Bi as ‘anchor

firms’. ‘Anchor firms’ are big external firms and research centers that are located in UPTEC for two reasons: to

strengthen their connections with the University of Porto, and to help with the development of start-ups, e.g. by

buying their products or services. Tenant firms are clustered into four groups: Biotechnology, Creative

Industries, Sea, and Technology, scattered across four different locations. UTEC therefore offered a rich and

diversified incubation context that fitted our research goals. The main study included only the start-ups that had

joined UPTEC at least four months before the data collection commenced; the purpose was to include only start-

ups that had been in the incubator long enough to make networking possible. With the help of the UPTEC

management team, 77 firms were identified that fitted this criterion, out of which 58 agreed to participate

(response rate of 75.7 per cent).The distribution of the 58 tenants between the cluster was the following:

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Biotechnology: 6 firms (of which 1 is an ‘anchor’ firm); Creative Industries: 16 firms (3 ‘anchors’); Sea: 3

firms; Technology: 33 firms (1 ‘anchor’).

Primary data was collected through a mixed methods approach: a survey, including specific social

network analysis (SNA) sections, was supplemented by semi-structured interviews with the entrepreneurs.

Interviews were also conducted with the incubator board and management team, which allowed us to understand

the context and current status of the incubator, as well as how networking was dealt with and promoted by the

NI. The combination of quantitative (SNA; Haythornthwaite 1996, Scott 2000) and qualitative techniques

(content analysis; Krippendorff 2004) allowed us to understand the outcomes of the incubation process, as well

as the processes that led to those outcomes (Tellis 1997). Thus, we respond to the need of qualitative studies that

improve our “understanding of the complexities associated with networks and how these impact on incubator

firms” (Soetanto and Jack 2013, p. 450). Our respondents (both for the interviews and the survey) were the 53

entrepreneurs (i.e. founders or general managers of the start-ups) and the general managers of the five ‘anchor’

firms.

One part of the survey was built around the levels of expectations and satisfaction regarding the four

support dimensions identified in our conceptual framework (Figure 1) and thus addressed research questions Q1

and Q2. In this context we excluded anchor firms as they are not located in UPTEC for incubation purposes;

thus, only the 53 entrepreneurs are considered. We operationalized the four incubator value dimensions as

follows: In relation to ‘Business Support’, we asked respondents about the ‘Management Support’, as well as

about the ‘Technical Support’ offered by the UPTEC’s management team (Scillitoe and Chakrabarti 2010). For

‘Infrastructure Support’, we included two factors: turnkey facilities, and facilities rent (Aernoudt 2004). We

analyzed the ‘Legitimacy/Credibility’ dimension through the assessment of the importance of the UPTEC

Brand, as well as the University of Porto Brand. Finally, ‘Networking Support’ was considered at internal and

external levels (Bøllingtoft and Ulhøi 2005; Bruneel et al. 2012). Internal networking was related to questions

regarding joining the incubator in order to develop relationships with other start-ups. Internal networks are

considered particular useful as they enable tenant companies to share all kinds of resources. Lyons (2000)

believes that the opportunity for networking with other start-ups is the most important service offered by the

incubator. External networking covered two factors: support to create external relationships, and access to the

University of Porto network. We treated the access to the university network separately, given that access to

academic facilities and specialized knowledge is considered a University Incubator specific form of value

creation (Grimaldi and Grandi 2005).

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We measured expectations regarding these dimensions by, first, asking entrepreneurs about how

important these factors were in their decision to join UPTEC. A five point semantic differential scale was used

to measure importance (anchored in 1- not important at all; 5- very important). Secondly, entrepreneurs were

asked to evaluate their satisfaction with each of the factors in relation to their initial expectations; again a five

point semantic differential scale was used (1- not satisfied at all; 5- totally satisfied).

Research questions Q3 and Q4 focus specifically on understanding networking-related aspects of the

incubator. To address Q3, entrepreneurs were asked to indicate on five-point scales the perceived frequency

(anchored in 1- rare; 5- very frequent) of their interactions with other UPTEC incubated start-ups, with the

UPTEC’s management team, and with researchers and faculty from the University of Porto. These networking

activities were measured at each at the following six levels: social contacts, business and counseling exchange

(‘ask for and being asked for’); technical counseling exchange (‘ask for and being asked for’); commercial

interaction (‘buy from, or sell to’); joint R&D projects; and co-development of products, services or processes.

These levels were defined after a preliminary interview with the UPTEC management team and an entrepreneur

from an incubated company, who helped us identify all the relationships that could take place within this

specific NI. The study of interactions was restricted to tenants, UPTEC, and the University of Porto, as the

inclusion of all start-ups’ external partners would have been too complex and not feasible as part of this research

project; moreover, the pre-study had established that networking was primarily seen by entrepreneurs as an

internal activity including university departments. Finally, also using five-point semantic scales, we asked

entrepreneurs about the usefulness they attributed to the networking events organized by UPTEC’s management

team (anchored in 1- not useful; 5- very useful), and how often they attend those events (1- rarely; 5- very

frequently). After completion of the survey, all respondents were interviewed and asked to further elaborate on

their survey answers; this provided us with a more complete and contextual understanding of the networking

processes.

Data was analyzed using different techniques. Survey data was analyzed using descriptive statistical

techniques. Additionally, data pertaining to interactions (Q3) was analyzed using Social Network Analysis

techniques, supported by UCINET 6.0 (Borgatti and Everett, 1992). This allowed us to understand the structure

and patterns of networking interactions in the NI (Skerlavaj and Dimovski 2006). In order to understand the

underlying causes and processes leading to the identified structure and relational patterns (Q4), all interviews

were transcribed and content analyzed.

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6. UPTEC Case Analysis, Findings, and Discussion

The discussion of analyses and findings is organized around the different research questions. Table 1 provides

an overview of data regarding research questions Q1 and Q2. Only answers showing higher levels are displayed

(corresponding to points 4 and 5 on the scales, labeled ‘rather important’, and ‘very important’, respectively, for

expectations; and ‘quite satisfied’, and ‘totally satisfied’, respectively, for satisfaction).

Table 1 Relevance and Satisfaction Regarding Support Dimensions

Dimensions Factors

% of 4-5 answers

(rather and very

important

% of 4-5 answers

(quite and totally

satisfied)

Infrastructure

Turnkey facilities 72% 70%

Facilities' rent 70% 52%

Business

support

Business support provided by UPTEC's

management team 48% 35%

Technical provided by UPTEC's

management team 37% 26%

Legitimacy

University of Porto brand 83% 80%

UPTEC Brand 65% 70%

Networking

Access to the University's network 70% 31%

Support to create external relationships 69% 39%

Existing startups when deciding to join

UPTEC 20% 22%

Possibility to develop relationships with

other startups 67% 31%

6.1. Discussion Q1. “What are the expectations which entrepreneurs have when choosing a business

incubator?”

As Table 1 shows, several of the incubator value dimensions previously identified in the literature (i.e. ‘Business

Support’, ‘Infrastructure Support’, ‘Legitimacy/Credibility’ and ‘Networking’) are considered by entrepreneurs

as being rather important, or very important. Only three factors or sub-dimensions, namely ‘technical support’,

‘management support’ (both pertaining to the value dimension of ‘Business Support’), and ‘considering existing

start-ups’ (pertaining to the ‘Networking’ dimension), were not deemed to be important by the majority of the

respondents. Thus, our work does not support the idea that the acquisition of tangible resources is the strongest

motive to being located in an incubator, as suggested by Soetanto and Jack (2013).

It is interesting to note that the connections with the University are highly valued in terms of

expectations, not only because of its associated brand (which may add to the start-ups’ legitimacy), but also

because of the University’s network that may be accessed through the incubator. In terms of ‘Legitimacy’, it is

clear that the entrepreneurs value the university brand more highly than the incubator brand. ‘Infrastructure’

15

factors were also considered as important aspects, confirming the importance attributed by entrepreneurs to cost

and operational issues.

At the level of the ‘Networking’ value dimension, an important finding is that companies that indicated

internal networking as key in their decision for choosing UPTEC, also consider external networking as

important: entrepreneurs who had high expectations regarding the possibility to develop valuable relationships

with other incubated firms were also strongly interested in using UPTEC as a lever for the creation of

relationships with external actors, namely with the University of Porto’s network. We must note that the

importance granted both to external networking (University and other external partners) and internal networking

(with other tenants) as a location criteria was found to be much higher than what Soetanto and Jack (2013)

found in their study, suggesting that UPTEC start-ups have a strong network-oriented profile. However, the

results are partially counterintuitive. While the possibility to develop relationships with other start-ups within

UPTEC is of great importance, the actual pool of UPTEC start-ups was considered by only 20 percent of the

respondents as an important expectation regarding value. Through the follow-up interviews it became clear that

the majority of the respondents did not even know which businesses were currently being hosted by UPTEC at

the time they joined the incubator. This finding contradicts Schwartz and Hornych’s (2008) work, who claim

that when assessing an incubator in the selection stage, prospective tenants consider amongst other factors the

identity and features of the existing tenants (i.e. future fellow tenants). This would allow future tenants to be

better informed regarding the value that they can actually get in terms of networking by joining a specific

incubator.

6.2. Discussion Q2. “What is the entrepreneurs’ degree of satisfaction in relation to their initial value

expectations of the business incubator?”

With the exception of the brand dimension (that is, ‘Legitimacy’), and to a lesser extent ‘Infrastructure’ (namely

regarding the provided ‘turnkey facilities’), it is clear that the incubation process within UPTEC did not meet

most entrepreneurs’ initial expectations regarding the incubation value for their start-ups (see Table 1).

Moreover, when satisfaction is related to factors with a stronger relational nature, the evaluations reach the

lowest values. Results show an overall lower satisfaction with ‘Networking’ value (external and internal) and

with ‘Business Support’, compared to other dimensions. These results are replicated in all sub-dimensions of

these two value dimensions, and are therefore providing evidence for a structural shortcoming in the NI. This

corroborates the idea that for satisfaction considerations an understanding of what the incubator offers in terms

of support activities is not as critical as the extent to which that potential is being used (Hughes et al. 2007).

16

In the specific case of university incubators such as UPTEC, O’Gorman et al. (2008) state that the

management team’s ability to develop external networks is an important determinant of incubator effectiveness.

Although UPTEC states that networking support is one of its core activities, evidence shows that tenants’

expectations regarding this dimension are not being fulfilled. Therefore, there may be a misalignment between

the networking connections that the incubator makes available to the tenant companies and what the latter

expected it to provide. Such issues of alignment between the incubator support activities and their tenants’

profiles have been identified in the literature as being core for incubator effectiveness (Bruneel et al. 2012). Our

findings may also reflect the incubator management team’s lack of capacity to promote networking activities

and relationship development (Ahmad and Ingle 2011; Hughes et al. 2007), or the tenants’ unwillingness or lack

of capacity to use the support services that are made available (Hughes et al. 2007).

In summary, to understand issues around ‘Networking’ value, which represents an important aspect of

entrepreneurs’ expectations as well as a crucial aspect of the NI’s value proposition, some additional analyses

are required. These are carried out below, in the context of the next two research questions, where we look

further into the “Networking” dimension of the NI.

6.3. Discussion Q3. “What is the nature of networking (network relationships) as part of the business

incubator?”

The UPTEC network was analyzed on several relational levels2. The aim was to evaluate resource pooling

activities and knowledge acquisition activities (Hughes et al. 2007), as well as interpersonal contacts that “can

provide opportunities to share thoughts, feelings and values” (Ahmad and Ingle 2011, p.635). This would allow

us to evaluate if “high quality relationships” between tenants would foster knowledge sharing, leading to project

collaborations (Soetanto and Jack 2013, p. 438). The relational analysis levels were as follows: social contacts,

technical counseling, business counseling, commercial exchange, joint R&D, and joint development of

processes, products or services. To understand the characteristics of the relational network along those levels,

we analyzed network density and relational intensity (Kilduff and Tsai 2003; Scott 2000). Network density is a

ratio between the relationships that actually exist, and all the relationships that could exist in a network

(Hanneman and Riddle 2005). This way, the denser the network, the higher the number of actors related with

each other. On the other hand, relational intensity is measured through the frequency of contacts between

connected actors (Kilduff and Tsai 2003). To measure intensity, we used a five point scale ranging from 1 - very

rarely, to 5 - very frequently. Both density and intensity measurements were applied to all relational levels,

2 As we intend to understand the entire networking patterns within the incubator, the analysis of Q3 and Q4

includes the start-ups and the anchor firms.

17

thereby providing us with an idea of the extent to which the networks’ relational potential was being exploited.

Table 2 shows the density for each considered relational level. We have included the measures under two

different scenarios: including the UPTEC management team, and excluding the team. The second scenario

allowed us to assess the networking amongst tenants only.

Table 2 Density Analysis Concerning Relational Levels

Analysis Level

Average Density

Without UPTEC

Management

Team

With UPTEC

Management

Team

Social Contacts 0.1118 0.1272

Ask for Business Counseling 0.0267 0.0373

Be asked for Business Counseling 0.0205 0.0283

Ask for Technical Counseling 0.0246 0.0316

Be asked for Technical Counseling 0.0253 0.0300

Buy 0.0154 0.0150

Sell 0.0140 0.0180

R&D 0.0055 0.0053

Joint process/product/services

development 0.0133 0.0133

The UPTEC network displays a low level of density of relationships in all relational dimensions. The

highest density was observed for social contacts: 11.18 per cent; all remaining relational levels displayed a

density level below 3 per cent. This means that few of the possible relationships within the incubator were in

fact established. As such, resource pooling and sharing as well as interactions to acquire knowledge, are rare

activities amongst the start-ups, which limits start-ups’ potential to exploit the network (Hughes et al. 2007). In

a study carried out by Honig and Karlsson (2010), where the authors compared the density of the networks for

incubated and non-incubated companies, findings show that the networks for the former presented significantly

higher levels of density than the latter. In line with this work, and although we are not considering non-

incubated companies, our initial expectation was that the UPTEC tenants’ network would present a higher

density.

Adding the UPTEC management team to the picture did not produce relevant differences. Still, at the

level of social contacts and counseling, the inclusion of the UPTEC management team made the network

slightly denser. This is in line with Honig and Karlsson’s (2010) work which points to “the source of [tenants’]

most important contacts (the incubator manager) and referencing the incubator manager himself as a key

important person in the business” (p. 721).

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In order to better understand the characteristics of the NI network, we re-calculated the network density

by adding an intensity restriction: We only considered those relationships that had a frequency higher than 2 on

the 5 point scale. This allowed us to exclude sporadic relationships from the analysis. Table 3 illustrates the

results of this analysis.

Table 3 Density Analysis (With Intensity Restriction)

Analysis Level

Average density

Density

(after intensity restriction)

Without UPTEC

Manag. Team

With UPTEC

Manag. Team

Without UPTEC

Manag. Team

With UPTEC

Manag. Team

Social Contacts 0.1118 0.1272 0.0475 0.0633

Ask for Business

Counseling 0.0267 0.0373 0.0062 0.0083

Be asked for Business

Counseling 0.0205 0.0283 0.0027 0.0030

Ask for Technical

Counseling 0.0246 0.0316 0.0075 0.0087

Be asked for Technical

Counseling 0.0253 0.0300 0.0041 0.0047

Buy from 0.0154 0.0150 0.0062 0.0060

Sell to 0.0140 0.0180 0.0044 0.0047

R&D 0.0055 0.0053 0.0014 0.0013

Joint process/prod/serv.

development 0.0133 0.0133 0.0038 0.0037

The results show that, in addition to a low level of density, relationships between UPTEC actors also

show low intensity. The mere elimination of sporadic relations made the network density drop considerably on

all relational dimensions. As such, networking does not seem to have an expressive or solidified existence in this

NI. Social contacts represented the only level where networking could be considered of some relevance. This is

in line with the study by Schwartz and Hornych (2010) that also identified informal relationships as the

predominant interactions within incubators. The fostering of social networks and the support for social capital

has been identified in the literature as a main raisons d’être of incubators (Collinson and Gregson 2003). The

UPTEC management team is (as expected) apparently a particularly well-connected actor at the social level, in

line with the idea put forward by Ahmad and Ingle (2011) that relationships between the management team and

the tenants are not ‘strictly business’.

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Overall, our results strengthen the existing knowledge of the dominance of interactions of

informal/social nature within business incubators. Moreover, the low density scores that resulted from the

analysis corroborate the idea that business incubators, even those of the networked variety, hold a limited ability

to foster formal and more business-oriented relationships between their tenants. However, we cannot conclude

from these results that the low intensity of networking taking place within this incubator is (solely or

predominantly) due to the management team’s incapacity to promote networking.

Social contacts are frequently considered as a possible enabler of other types of interactions, i.e. of a

more formal and business-oriented nature (Cooper et al. 2012; Honig and Karlsson 2010; Rothschild and Darr

2005). Moreover, informal relationships have been identified in the literature as a powerful source for

opportunity identification (Singh, 2000), which is then followed by exchanges of relevant information and the

discussion of cooperation potential, and in some cases taken forward and institutionalized (Kreiner and Schultz

1993). Given the importance that social relationships play, together with the observed predominance of the

social contacts in UPTEC, we analyzed the correlations between social contacts and other types of relational

networking (as shown in Table 4).

Table 4 Correlation Analysis between Social Contacts and Other Relational Levels

Social contacts and…

Pearson’s Correlation

Correlation Significance

1) Ask for business counseling 0.479 0.000

2) Ask for technical counseling 0.428 0.000

3) Co-development 0.165 0.000

4) R&D 0.178 0.000

Results show that the correlation with social contacts is relevant only for contacts aimed at technical or

business counseling. However, social contacts seem insufficient to ignite other types of relationships which are

more core business related, like joint R&D or co-development of products, which traditionally require a deeper

commitment and stronger interactions between the actors. This contradicts existing literature: social capital was

expected to promote the identification of opportunities for more formal business interactions (Aldrich 1999;

Birley 1985; Honig and Karlsson 2010), or even more specifically the co-production of emergent technology

(Rothschild and Darr 2005). However, similar findings to ours were made by Schwartz and Hornych (2010),

who observed in their study how despite the predominance of social relationships, no relevant formal

interactions were observed.

20

Networking can thus be described as scarce at UPTEC, with low density and low intensity levels,

despite the incubator’s considerable networking support offered by the incubator management, in line with its

characteristic as a NI. It is therefore important to understand the reasons why this networking potential was not

translated into value for the start-ups.

6.4. Discussion Q4. “How does networking evolve in a business incubator?”

We used content analysis of the interviews to gain an initial understanding of the networking evolution and of

what entrepreneurs perceive to be the main barriers to networking. This was complemented by another SNA

analysis relating to one of the identified barriers (i.e., geographical distance), as well as for one networking-

enabling factor (i.e. participation in networking events). It is important to emphasize that in line with the survey

results the majority of respondents stated an a priori willingness to network with other companies incubated at

UPTEC. The value of interactions was recognized by these entrepreneurs, for example in statements such as "all

this potential of the companies that are here could provide an exchange of ideas, experience and knowledge"; or

"networking is very important for any company at its starts because nobody can win alone and these

relationships are supposed to be an advantage"3. Thus, it was not due to a lack of appreciation of the

networking value that start-ups did not interact further with each other. A further analysis of the interviews

helped us to identify some enabling factors and also the reasons why this appreciation did not result in actual

interactions.

6.4.1. Lack of Information about the Other Actors

A first identified barrier to networking was the start-ups’ lack of mutual knowledge about each other’s

businesses, both within and between clusters in UPTEC. Most respondents pointed out that this ‘ignorance’ was

a deterrent to the establishment of partnerships or interactions. In fact, tenant entrepreneurs largely ignored each

others’ specific projects, activities, resources, or expertise. As one respondent claimed "we still need to go a

long way, until we will communicate more with each other... and knowing who is here, who went away, who will

join, what one makes". Another respondent opined that it was important and necessary to "know well who is

incubated and the profile of the people". The incubator management’s team may have an important role to play

here, e.g. in facilitating and fostering the mutual knowledge between tenants by instigating a communication-

enabling environment between tenants, which can result in an increased level of cooperation activities (Schwartz

and Hornych 2010) and interactions to bridge expertise gaps (Durão et al. 2005).

6.4.2. Incubator Size

3 This and the following quotes are excerpts of the interviews conducted with the entrepreneurs.

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Some of the entrepreneurs that joined UPTEC at its inception stage relate this ignorance to the current

incubator’s size, which grew exponentially over the last years. One respondent explained that, at the beginning,

"we were a few companies, everyone knew each other, what each company was, who the people were. We all

got along and we got to know each other in the corridors. […] now there is a much greater separation and

basically there is almost no contact with other UPTEC companies”. It is also interesting to recall that the cluster

that presents the highest internal density is the Sea cluster, the smallest cluster in UPTEC with only three

companies. This fact may constitute an additional indicator of the importance of the incubator size to the

development of social interactions and mutual knowledge. These findings seem to contradict previous evidence

found by Schwartz and Hornych (2010) regarding a positive influence of incubator size, measured as the

number of incubated firms, on the propensity to engage in commercial interactions and technological

cooperation. Moreover, our findings regarding incubator size corroborate only partially previous results, namely

the work by Aerts et al. (2007), who found an inverted-U shaped relationship between incubated firm

performance and incubator size. According to these authors, small size and big size incubators can offer certain

support with the associated value for the tenants that medium size incubators are not able to, being thus

characterized by a higher failure rate. Our study corroborates the notion that small incubators “can closely

follow up the tenant companies and personally guide them through their growth process” (Aerts et al. 2007, p.

263), promoting closer and stronger informal and personal ties between the incubator team and tenants, as well

as between tenants. However, our study does not show any evidence to support the achievement of economies of

scale, or the development of a professional culture resulting from the incubator’s exponential growth, resulting

in more value to start-ups and consequently higher success rates.

6.4.3. Space Configuration

A third aspect that was widely reported by respondents concerned the configuration of the UPTEC space.

Several interviewees stated that the relationships they had were mainly with companies located within their

vicinity. As one respondent explained, "we ourselves related more with the people from this floor that we meet

out there". The interviews also highlighted that the geographical dispersion of UPTEC across four different

locations seemed to make the creation of relationships between the companies from different clusters a

cumbersome process. As one entrepreneur claimed, "there is a large gap between the two clusters [creative

industries and technology]. We function as small islands where the common denominator is UPTEC… but there

is no proper connection between the clusters”. Respondents also mentioned that the lack of common spaces

hindered the establishment of social contacts. This seems important as social contacts could be useful to

minimize the lack of mutual knowledge and also to facilitate the exchange of information regarding projects,

22

resources and skills of each of the start-ups. As one entrepreneur explained, "the physical structure of space

does not enhance a common living, at least not in this building. There are no meeting spaces… the only space

there is…is outside the building".

Physical or spatial proximity is recognized in the literature as factors that positively influence

networking within business incubators (Aerts et al. 2007; Cooper et al. 2012; Durão et al. 2005; McAdam and

McAdam 2008; Phillimore 1999). According to Schwartz and Hornych (2010), “spatial proximity between

[business incubator] firms facilitates the transfer of valuable information and knowledge and the exchange of

experiences and provides opportunities to work on and acquire certain projects jointly” (p. 486). Co-location is

believed to facilitate informal networking, which can then result in a more formal support network (McAdam

and McAdam 2008). Analyses of our data corroborated these considerations: we looked for variations of

network density at the social level (i.e. the level where a greater relational density and intensity was observed)

within and between the four clusters of incubated companies (i.e. Biotechnology, Creative Industries, Sea, and

Technology). Table 5 shows that the highest density occurs in interactions with the management team,

independent of the NI cluster in which a start-up is located. Interaction within the clusters is relatively low. The

exception is the slightly higher density of the Sea cluster, which is probably due to its small size (three

companies) and large physical distance from the other clusters. Inter-cluster density is even lower or non-

existent (see Sea-Biotech interactions).These results seems to support findings by Bakouros et al. (2002) who

show how spatial proximity is not sufficient to guarantee incubator-internal networking activities or joint

collaboration.

Table 5 Density of Social Contacts (Analysis by Cluster)

Social Contacts UPTEC Tecnological Sea

Creative

Industries Biotech

UPTEC 0 0.821 0.500 0.636 0.600

Tecnological 0.821 0.231 0.030 0.072 0.044

Sea 0.500 0.030 0.400 0.008 0.000

Creative Industries 0.636 0.072 0.008 0.242 0.005

Biotech 0.600 0.044 0.000 0.005 0.133

As our data analysis suggests that network density is higher within clusters than between the clusters,

we explored the E-I (External-Internal) Indicator (Krackhardt and Stern 1988), which is used to compare the

number of established relationships inside and outside groups (Hanneman and Riddle 2005). The application of

23

this indicator to UPTEC’s clusters confirms that social contacts are developed mostly within each cluster (see

Table 6).

Table 6 E-I Analysis: Social Contacts Relationships

Social Contacts Frequency % Network

Internal 478 0.626

External 286 0.374

E - I Index -192 -0.251

Considering that in the UPTEC network 63 percent of the 764 existing relationships are internal (i.e.

478 relations), this test revealed an E-I index4 value of -0.251. This is a clear indicator that at the social contact

level, the UPTEC network is essentially formed by relationships within groups - in this case companies located

in the same cluster and thus developing business activities in the same general industry. This issue regarding

homogeneity of actors and the specialization of incubators will be further discussed below. Similar analyses

were carried out for other relational dimensions, confirming the same inward-oriented patterns but with lower

density values.

6.4.4. Joint Activities and Networking Events

UPTEC develops a set of formal and informal networking events, performing what Schwartz and Hornych

(2010, p. 486) call “an essential bridging function, bringing together their tenant firms”. Thus, we wanted to

understand the effectiveness of UPTEC’s networking events in attracting tenant entrepreneurs and in producing

useful results for their start-ups. We therefore measure the frequency of participation and the perceived

usefulness of the events (see table 7).

Table 7 Participation and Usefulness of UPTEC Networking Events

Perceived usefulness of UPTEC networking events

1. not

useful at

all 2 3 4

5. very

useful Total

Frequency

of

partipation

in UPTEC

networking

events

1. rarely 0 1 6 3 5 15 25.9%

2 0 4 7 3 4 18 31.0%

3 0 0 3 7 0 10 17,2%

4 0 0 2 2 3 7 12.1%

5. very

frequently

0 0 4 1 3 8

13.8%

4 An E-I index of -1.0 would mean that only internal relationships exist, while an E-I index of +1.0 would mean

that all relationships are external (Krackhardt and Stern, 1988).

24

Total 0 5 22 16 15 58 100%

8,6% 37,9% 27,6% 25,9% 100%

The majority of the entrepreneurs recognized the potential value of those formal and informal events:

53 percent of the entrepreneurs found them rather or very useful. Regarding one event, a respondent stated that

it "was very important to have the opportunity to meet companies, and to discover what they were doing. This is

absolutely critical because it is useful information for us and for others". Despite the value being attributed to

the networking events, frequency of participation is rather low: 57 percent of entrepreneurs rarely attend these

events. A correlation analysis between the two variables revealed a very low Spearman correlation coefficient of

0.092: this suggests that perceived value is not related to participation, or vice-versa.

Some respondents were disappointed with the outcome of the events they had attended, as they felt that

participating in the events had no immediate results. Such a negative perception was especially associated with

the informal events. One respondent expressed the view that people "attend these meetings really in the hope

that things will solidify somehow, that if there is a spark, then things will happen by themselves". Following

these negative experiences, a number of respondents argued that a change in the modus operandi of the

networking events was required. A few respondents called for a greater formalization of the networking events,

making them a stronger part of the routines of the incubation process, even including directive measures by the

NI management team. One respondent said: “I don’t know if this is systematized, that is, I think there is still

some disorganization and you can’t create those links in a systematic way", whilst another respondent added

that "there was never any systematization of relationships". In addition, respondents also expressed the need to

intensify joint activities such as coaching or project application programs, which were mentioned by several

participants as being the most productive activities promoted by UPTEC. As a way to intensify knowledge

exchange within each cluster, others pointed to the need to create events that were more focused on each

cluster’s predominant business activity.

Participation in networking activities is expected to favor interactions between the incubated companies

(Hansen et al. 2000), thus promoting mutual understanding and the possibility of collaboration (Soetanto and

Jack 2013). With this in mind, a SNA analysis was carried out to understand if the network density increased

with higher frequency of participation in networking events organized by UPTEC’s management team. The

resulting analysis (see table 8) revealed a positive relationship between participation in networking events and

the establishment of social contacts: the density of the network of ties between tenants that both frequently

participated in networking activities (operationalized as scoring a 3, 4 or 5 on a 1-5 scale measuring frequency)

25

was 22.2%, corresponding to 133 ties, whilst the density amongst the tenants which both did not frequently

participate in such events was merely 4.2% reflecting 50 ties. The number of ties emanating from tenants that

frequently attended the networking events was also slightly higher than the inverse (i.e. ties emanating from

non-participants in interactions with participants): 80 ties (9.1%) against 75 ties (8.6%). This means that actors

that participate more often in networking events show a higher density of social interactions than those actors

who participate less often. However, this association was not found to be valid for the remaining relationship

levels, showing that the networking events do not result in the establishment or development of relationships of

a business nature, such as co-development of products, services or processes. Given that social relationships are

recognized as an important starting point for the establishment of relationships of a more formal nature (Allen

and Rahman 1983; Rothschild and Darr 2005), the networking events nevertheless seem to be fulfilling part of

their set role, and resulting business interactions may follow with a time lag.

Table 8 Density of Social Contacts (and Corresponding Number of Ties) and Participation in Networking

Events

Tie recipient Tenants who did not

frequently participate in

networking activities

Tenants who participated

frequently in networking

activities Tie emanator

Tenants who did not

frequently participate in

networking activities

0.042 0.086

(number of ties: 50) (number of ties: 75)

Tenants who participated

frequently in networking

activities

0.091 0.222

(number of ties: 80) (number of ties: 133)

6.4.5. Specialization, Complementarity, and Access to Resources

Whilst spatial proximity is generally considered as a factor that promotes interactions (Durão et al. 2005),

results of the influence of business complementarity and homogeneity (i.e., companies doing business in the

same area or sector, are sharing markets, or have similar customers, staff know-how; Schwartz and Hornych

2008) are ambiguous. On the one hand, the literature points to specialized incubators as presenting a higher

potential for effective results, better internal communication and networking relationships (Schwartz and

Hornych 2010). Thus, increased interactions are expected to be observed when there is higher similarity

between tenants compared to situations where there is low similarity between incubator start-ups (Aaerts et al.

2007; Bakouros et al. 2002; Bollingtoft and Ulhoi 2005; Chan and Lau 2005; Hansen et al. 2000; Hughes et al.

2007; McAdam and McAdam 2008). In a study conducted by Ahmad and Ingle (2011), it was found that

incubators that adopted a homogenous start-up mix base believed that “a similar client base allowed the pooling

26

of resources, encouraged knowledge and experience sharing and promoted the development of a community that

shared a common purpose” (p. 636). However, other empirical studies show that specialized incubators are not

more effective than diversified incubators in terms of networking (Schwartz and Hornych 2010), and some

studies even show that high levels of homogeneity in the client base may hinder networking (Ahmad and Ingle

2011).

In the case of UPTEC, interviews revealed that the networking potential was seen as an illusion as the

complementarity between start-ups was perceived as being rather low. This means that even if networking

processes were more effective, and if both management team and the entrepreneurs performed better in

instigating networking activities, not many companies would successfully interact with the others, as they do not

perceive each other as holding complementary interests, resources, or activities. One respondents claimed that

"within the universe of companies that are installed here, we don’t see companies with potential to be useful.";

another respondent mentioned that “often I don’t quite understand if there can exist synergies between the

companies". Therefore, although companies located in the same centre are similar in terms of the nature of their

activities (e.g. technology-based, creativity-oriented, thus forming different clusters), tenants do not perceive

any similarities or common points of interest with their fellow incubatees that would justify fostering

relationships.

In fact, more than one company also expressed a lack of trust in relationships with some potential

internal partners: "I think that companies that are here are either my partners or competitors, and I think this is

a barrier for people to talk with each other". This is in line with previous work that shows how “too closely

related market segments may impede interaction and have a negative effect on the networking climate within the

incubator” (Schwartz and Hornych 2010, p. 491). Companies feel uncomfortable disclosing proprietary

information or business ideas that may be appropriated by other tenants (Ahmad and Ingle 2011; Hughes et al.

2007; Totterman and Sten 2005), a problem that seems to be intensified in the case of specialized incubators

(Schwartz and Hornych 2010). Our study corroborates these ideas: although a greater network density was

observed within clusters (cf. Tables 5 and 6), which are more homogeneous in terms of tenants’ sectors of

activity, networking within cluster is still scarce and almost limited to social contacts. It can be argued that this

seems to be a consequence of both the ignorance regarding other tenants’ business activities, as well as resulting

from an unwillingness of sharing important information with potential competitors.

6.4.6. The Role of UPTEC Management Team

27

Entrepreneurs’ perceptions were so far treated as being the key aspect that impacts on the interaction activities

within UPTEC, particularly the lack of a more integrated networking. However, it should be noted that both

entrepreneurs and the UPTEC management team are actors within the internal networking processes, and

therefore the involvement of UPTEC itself represents an important influence on networking activities. The NI’s

management team can play an important role in removing or minimizing the obstacles to networking within the

incubator (Cooper et al. 2012). For example, the management team can promote and initiate contacts between

start-ups, thereby easing the instigation of relationships (Ahmad and Ingle 2011; Hughes et al. 2007; Soetanto

and Jack 2013). As mentioned above, NIs may also promote joint activities between the start-ups, providing

them with opportunities to get to know each other, and therefore engineer a way to enhance the incubator’s

social dimension. This reflects the management team’s role of potential relational broker (Ahmad and Ingle

2011; Bøllingtoft and Ulhøi 2005; Hughes et al. 2007), connecting disconnected parties or clients, and establish

sub-networks (Burt 2004). Also, the improvement of networking between the start-ups may require effective

communication strategies, supported by a clear understanding of the profile of each incubated firm.

In the UPTEC case, the majority of respondents acknowledged the positive role played by the

management team in the networking process. They believed that the UPTEC management team strives to

promote the integration of those incubated, namely through the organization of networking events and through

the resource/capability endowment and needs matching between firms showing potential for synergies and

complementarities. In this respect, one respondent mentioned that concerning a partnership which had

developed with another company, "much of this came about due to that matching...". Another entrepreneur

pointed out that UPTEC aims at creating a fit between companies. However, the same respondent identified

opportunities for improvement. In particular, he stated that there "could be a greater forcing (...) in fostering

these relations", placing high expectations on the assertive role which needs to be played by the UPTEC

management team: "We need a little oil in this gear for people to meet and know what each one does".

6.4.7. The Role of the Entrepreneur

Although NIs can be said to offer start-ups particularly favorable conditions to network with valuable

counterparts (Bollingtoft and Ulhoi 2005), the fulfillment of the networking potential (e.g. to seek or access

resources or acquire knowledge) is conditioned by the way entrepreneurs exploit these opportunities created by

the incubator (Hughes et al. 2007). Namely, entrepreneurs who actively seek networking opportunities and are

more predisposed to engage with the incubator management in the co-production of networking value (Ahmad

and Ingle 2011; Rice 2002) are in a better position to create, share, and leverage resources through interactive

relationships. Therefore, “the type of incubation outcome and the value created depends crucially on how the

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incubating firm behaves” (Hughes et al. 2007, p. 171). Networking processes and outcomes may thus be

affected by the entrepreneurs’ willingness to network.

Regarding the level of willingness to engage in networking activities, entrepreneurs in our UPTEC case

mentioned three different sets of motivations for being interested in networking activities: need for social

support, need for a sense of belonging to a group, and access to resources (Cooper et al. 2012; Pfeffer and

Salancik 1978). Entrepreneur-related obstacles that may hinder a start-up to fully exploit NIs networking

potential can be related to the entrepreneur’s orientation or start-up’s managerial issues, such as time constraints,

lack of information about other residents or interaction partners, and lack of trust or fear to disclosure

proprietary information (Cooper et al. 2012; Hughes et al. 2007). Time constraints are of particular importance,

as in the start-up’s early development stages, entrepreneurs’ attention is mainly concentrated on everyday issues

of survival (Autio et al. 2000; Zhara et al. 2006).

In the UPTEC case, the weakness of the networking activities was partially attributed to the

entrepreneurs’ behavior. Several entrepreneurs recognized their inertia in exploring new relationships and

potential synergies. A large proportion of respondents justified this inertia with lack of time and resources to

invest in networking. This lack of availability resulted in a weak participation in networking events and in low

initiative to interact with other companies on a more formal and business-related level. The lack of availability

was justified by the entrepreneurs’ need to concentrate on their own business ventures. One respondent

explained that, "we are still very busy developing the various ideas we had for the company", and another added

that "Honestly… I have been a bad student in this field”. Entrepreneurs’ factors were therefore identified in our

study as one of the obstacle for networking.

7. Conclusion

7.1. Contributions and Implications

This study contributes to the BIs literature in two main ways. First, we undertake an entrepreneur-centered

perspective of the creation of value, and are therefore adding to the growing body of literature that undertakes

this view (Aaboen 2009; Clausen and Kornliussen 2012; Hughes et al. 2007). Secondly, by exploring the

networking processes within a NI, as well as outcomes, underlying motivations, and key factors that condition

the effectiveness of those processes, we contribute to a more granular and network-based view of the business

incubator’s internal dynamics (Ahmad and Ingle 2011; Hackett and Dilts 2004). This study, additionally adds to

the empirical body of research in the area of BI and NI, with the analysis of the case of UPTEC, a university NI.

29

Based on previous studies, (e.g. Mian 1996; Hansen et al. 2000; Bollingtoft and Ulhoi 2005; Bergek

and Norrman, 2008), we developed a framework that integrates the support activities offered by a BI

(particularly for the NI type of BIs) in relation to the challenges that start-ups face at their early stages. Drawing

on the principle that the extent to which the BI’s value offer responds to the start-up needs is a measure of

performance of the BI (Autio and Klofsten 1998; Bruneel 2012), this integrative framework is put forward as an

effective tool to evaluate BIs’ performance. Our research provides valuable insights for business incubators’

promoters and management teams: it helps understanding the factors that are critical in entrepreneurs’ decision

processes of venture location, allowing the adjustment of BIs/NIs’ offerings to entrepreneurs’ value needs, and

therefore enabling an optimized incubator management. Our research also equips entrepreneurs with a tool to

assist them in their location decisions.

An in-depth analysis of the networking processes taking place within UPTEC, highlighted the fact that

for NIs to be effective on networking, special attention should be given to multiple aspects. First of all, although

the tenancy selection process has been identified in the literature as a key aspect to assure incubators’

effectiveness (Aerts et al. 2007; Bruneel et al. 2012; Grimaldi and Grandi 2005), our case shows how an

apparently effective recruiting policy is not sufficient to ensure effective networking to happen. For example,

the willingness and availability of entrepreneurs to network seems to impact the effectiveness of the networking

process (Hughes et al. 2007). The management team could have picked up this reality if they had detected

potential tenants’ low interest in finding out about UPTEC’s portfolio of incubated firms before joining the

center; most respondents were not interested either in identifying potential complementarities of resources or

activities (Schwartz and Hornych 2008). Moreover, although the incubator recruited and grouped into the same

clusters a similar-base of customers, thereby looking for the benefits resulting from specialization, the levels of

interactions in the NI were still low. However, it may also be that companies are unaware of the potential for

complementarity due to their poor mutual knowledge, which may hinder the creation of new relationships

(Schwartz and Hornych 2010).

Secondly, the availability of valuable resources and services in the NI is not sufficient to produce value

for the start-up; instead, entrepreneurs were found to play a key role in turning the existing resources into

valuable capabilities (Ahmad and Ingle 2011; Hughes et al. 2007). As Bollingtoft and Ulhoi (2005, p. 275) put

it, “networks are not given but created by individuals and their social interactions with other individuals".

Despite being a NI, UPTEC presented very low levels of interaction across the several relational categories

analyzed. There were almost no relationships involving a greater degree of formal involvement (e.g. trade

30

relations or co-development) within the incubator. The value expectations regarding the incubation process of

this NI as a catalyst for new business relationships is to a great extent not being fulfilled. This reinforces the idea

that the alignment between services offered on the one hand, and tenants’ profiles (including their relational

orientation) on the other hand is key in assuring higher levels of networking. In what concerns the services

provided by the incubator, Hansen et al. (2000) reported that a NI should have two key characteristics: the

institutionalization of networking, and preferential access to a set of relationships/partners with which

partnerships could be formed. As evidenced by our analysis, UPTEC fulfills these characteristics adequately.

However, and despite its efforts to organize regular formal and informal events, by the time this study was

conducted UPTEC was not yet able to make the participation in those events part of the entrepreneurs’ routines.

This may be because entrepreneurs show different attitudes towards the value of networking (Hughes et al.

2007). In fact, in our case entrepreneurs that showed a priori the greatest interest in exploring the possibilities of

networking within the incubator, were also the most interested in using the incubator to access external actors;

this points to how the entrepreneur’s ‘relationship orientation’ is an important moderating aspect of networking

behavior (Chell and Baines 2000; Havnes and Senneseth 2001; Hultman and Shaw 2003). However, other

factors relating to the entrepreneur, such as time constraints (Cooper et al. 2012), were also found to be

associated with low levels of participation in networking activities, and the low level of investment in new

relationships.

Thirdly, incubators ought to develop the skills to better explore the strong social bonds traditionally

held with tenants (Ahmad and Ingle 2011). Start-ups seem to rely strongly on the management team’s

connections, yet the management team may lack the skills to fulfill its role of relational broker (Ahmad and

Ingle 2011; Hughes et al. 2007). As a well-connected actor (the one that is better connected in the network), the

UPTEC management team does not seem to be making full usage of its potential as an intermediate between

tenants. Whilst UPTEC tries to match the various start-ups with potential internal and external partners, the

mechanisms in place are apparently insufficient or inadequate to trigger new relationships (Bøllingtoft and

Ulhøi 2005; Hughes et al. 2007). Therefore, it is not only the entrepreneur’s attitudes and activities that play a

key role in the overall success of the incubation process: NI’s management teams also do (Grimaldi and Grandi

2005).

Fourthly, although the literature emphasizes the great importance of social relationships (Aldrich 1999;

Honig and Karlsson 2010; Soetanto and Jack 2013), our study shows that these do not seem to ignite other

relational levels (except for counseling relationships). The relationships within the incubator were found to be

31

developed mainly at the level of informal contacts, and even these were found to be quite rare; our study also

shows that overall, there is a low correlation between the establishment of social contacts and the establishment

of other types of relationships. In fact, we found no evidence of the mutually supportive environment created by

start-ups that Soetanto and Jack (2013) found in their study. Thus, while agreeing with these authors on the

importance of creating a relationship fostering environment, we suggest that instead of focusing too heavily on

promoting social networking events, the management team could instead focus on promoting more formal

relationships between actors; the former do not seem to be efficient, mostly due to a lack of systematization and

provision of further business-based information.

Fifthly, incubators should consider and integrate into their offerings and practices the fact that reality

evolves (Ahmad and Ingle 2011). This dynamic view would allow making the required adjustments to deal with,

for example, the exponential growth that was observed for this specific incubator with the substantial increase of

tenants and consequent negative effects in terms of (social) networking due to size (Aerts et al. 2007).

Sixthly, although spatial closeness and specialization are commonly identified in the literature

(although with exceptions) as being driving networking factors, this does not always seem to be the case (Aerts

et al. 2007; Ahmad and Ingle 2011; Schwartz and Hornych 2010). Despite the observed geographical closeness

and low diversity of within-cluster client-base, the levels of networking were still very low. Thus, although co-

location and specialization may be important in some cases, these are not sufficient conditions.

7.2. Limitations and Further Research

This article treats the start-ups as a homogeneous reality. It assumes that the start-ups included in this

study face the same liabilities of newness and of smallness, and that they use the incubator to minimize those

liabilities in the same way. However, start-ups may be in different incubation stages, holding different resources

(for example, registered brands or patents), or different access to external and valuable actors. Therefore, they

may use and value the incubator’s resource and activities in a diverse way (see for example Bruneel et al. 2012;

O’Gorman et al. 2008; Soetanto and Jack 2013; Vohora et al. 2004). Ignoring these differences is a limitation of

our study, and can constitute a future research issue. This project also investigates the networking activities

promoted by the incubator management team in its totality. However, the incubator provides very different

networking opportunities, ranging from informal parties, to group coaching sessions, workshops, or

international business missions. An individual study of different types of networking events, e.g. their

attendance rates, and the resulting networking outcomes could be helpful in understanding if specific event

32

formats may be more effective in producing specific network outcomes, for example, for the different

interaction levels covered in this study.

Additionally, not considering the start-ups’ external partners represents also constitute a limitation of

this study. First, it would be useful to understand if the legitimacy and credibility associated with the incubator

and the university brands is recognized by the external actors; that is, if those brands are effective tools to grant

the start-ups the credibility that they lack. Secondly, it would also be interesting to identify the start-ups’

external actors and the nature of their interactions in future research. This would enhance our understanding of

the different network strategies developed by the entrepreneurs and the constraints underlying their network

strategies within NIs. Finally, the fact that this research is based in a single case study limits the generalizability

of its findings. The study of other incubators of similar or different nature (e.g. within and outside a university

setting) is needed to confirm if our findings still hold in different contexts.

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